Market Overview
The Northwest Indiana region consists of Lake, Porter, and LaPorte Counties and is known for being Indiana’s second largest economy made up of urban, suburban and rural communities representing a $35 billion economy.
Lake and Porter Counties’ largest economic drivers are the steel and manufacturing industries. Lake County is a large supplier of steel for appliances, cars, as well as many other products, and contributes $18.2 billion of economic output annually.
In recent years, casinos have also contributed greatly to the area as there are four major casinos along Lake Michigan, specifically in Lake and La Porte Counties. A few more notable industries in the area are healthcare, manufacturing, and retail. Major employers of Northwest Indiana are US Steel Corporation, Cleveland-Cliff Inc., Blue Chip Casino, Franciscan Health, IU Health, Community Hospital, NIPSCO, and opening this year, the Hardrock Casino in Gary. As the healthcare sector continues growing in the region, there are multiple new hospitals and facilities under construction and planned for the next few years.
The Northwest Indiana region has long been known as a hub for manufacturing which propelled Indiana into becoming the leading supplier of steel in the United States since 1977. However, as technology transforms the tasks once done by human workers to robots and automation, the region has been working to diversify their economy and transform former industrial sites to new uses. The $40 million Digital Crossroads of America Data Center on the site of the former State Line Generating Plant in Hammond opened Phase I in 2019. The 77-acre site includes a 105,000 square-foot data center, tech incubator, renewable energy generation, and a greenhouse. The new data center project on the site could expand in phases to include 400,000 more square-feet and $200 million in total investment, which would make it one of the largest data centers in the country.
Northwest Indiana continues to benefit from its business-friendly environment and proximity to the Chicago metro. The region ranks second in gross domestic product among metropolitan areas in the state, only behind Indianapolis, and is ranked 89th overall nationally. Lake County ranks second out of 92 Indiana counties in total population and is ranked seventh best county in the state for Young Professionals in Indiana.
Northwest Indiana is often referred to as a “bedroom community” for nearby Chicago – offering a lower cost of living and slower suburban pace of life, with the proximity to the city to commute to work. As residents are continually relocating to the area and the region continues to see growth in new companies, several cities and towns have begun investing heavily in key areas to transform their communities.
To assist with the growth occurring in Northwest Indiana, transportation developments are underway. The South Shore’s $933 million West Lake Corridor project is expected to reach high-growth areas in Lake County, as well as create a faster, less expensive, and more reliable form of transportation to the Chicago market and surrounding areas.
Population
787,057
Households
302,089
Median Household Income
$59,622
Education
37% Highschool
30% Some College
24% Bach/Grad+
Total Businesses
25,614
Total Employees
316,024
Source: Esri 2021
1. http://www.hoosierdata.in.gov/major_employers.asp?areaID=089
1. https://www.niche.com/places-to-live/c/lake-county-in/rankings/
Industrial OVerview
DEMAND IS SPURRING MORE SPEC BUILDING CONSTRUCTION DESPITE HIGHER COSTS TO BUILD
Industrial real estate continues to do well across the country so it’s no surprise that the Northwest Indiana region is still in demand. According to Reonomy there were 44 industrial sales in Q1 and there were 33 sales in Q2. Approximately half of those did not disclose a sale price. Of the disclosed prices there were seven sales over $1 million. Lake County had the most sales; the majority were in Merrillville and Gary. La Porte accounted for five of the six sales in LaPorte County.
Merrillville is one of the hottest industrial markets in the region due to its location near I-65 and U.S. Highway 30. The location and Ameriplex at the Crossroads keep attracting new businesses to the market. Ameriplex had a couple new announcements in Q2. Domino’s Pizza is planning to invest $50.3 million to create a new supply chain center. The project is estimated to be complete in 2023 and will create approximately 140 jobs. The building will be 112,000 square feet but will be expandable to 150,000 square feet.¹ Another 279,000 square-foot facility under construction in Ameriplex has two additional tenants. Quality Pasta is taking 90,000 square feet that could create 70 new positions by 2024.² Precision Turbo is taking the remainder of the building and will create approximately 30 jobs.³ Midwest Truck and Auto announced in Q4 2020 that they were leasing 125,000 square feet. All three tenants should be moved in by the end of the year. The building was leased so quickly that another spec building is starting construction in September to fulfill demand. The new building will be on 27.5 acres and cost $25 million.⁴ Even more development could be coming next year as the Missner group has two parcels in Ameriplex with potential plans for an 800,000 square-foot and a 355,000 square-foot facilities.⁵
East Chicago has a couple of large projects planned. The Missner Group will begin construction later this year on a 250,000 square-foot building in East Chicago. The 14.4 acre property is in the Homerlee Business Park.⁶ Another developer, East Chicago Gateway Partners, have plans for the former DuPont brownfield site. The group plans a 1 million square-foot industrial center. They plan to break ground in 2022.⁷
Mauser Packaging, which makes packaging for recycled materials, has leased space in Valparaiso. The new industrial flex building has a total of 65,592 square feet and Mauser has taken a 25,110 square-foot space. The property is located at 2650 Barley Road.
Patrick Industries will be opening a 60,000 square-foot spacein La Porte in the Thomas Rose Industrial Park. The company is creating approximately 30 new positions by 2025. Patrick Industries is based in Elkhart and produces products for recreational vehicles, boating, and manufactured housing. The the 150,000 square-foot spec building by Qualls Development Group is currently under construction and can be expanded by another 150,000 square feet.
TRENDS
Rising steel prices will be felt in higher rents and sale prices for new spec buildings.
The Region continues to attract interest from companies in Illinois who seek a lower cost of doing business in Indiana.
Vacancy will likely remain low despite some new spec buildings that will complete construction this year. Buildings are selling and leasing quickly due to high demand.
- Land for both commercial and residential uses is selling quickly across the region. Industrial land for new developments is in short supply.
NORTHWEST INDIANA INDUSTRIAL SALES VOLUME ($)
Source: Real Capital Analytics
NORTHWEST INDIANA INDUSTRIAL BUYER COMPOSITION
Source: Real Capital Analytics
NORTHWEST INDIANA CONSTRUCTION COMPLETIONS ($)
Source: Real Capital Analytics
Office Overview
SMALLER OFFICES AND HEALTHCARE CONTINUE TO DRIVE THE OFFICE MARKET IN NORTHWEST INDIANA
Healthcare and smaller office sizes continue to drive the office market in Northwest Indiana. Office locations within 30 minutes of the Chicago Loop have no problem attracting tenants. The Fairmont in Munster is a Class B property, but a convenient location and competitive rents allow a property to compete with Class A buildings that may have more amenities, but will have higher rents.
According to Reonomy there were 18 office sales in Q2 2021. Ten of those sales were for buildings or office suites under 10,000 square feet. A couple of the smaller sales were single office suites. In Crown Point a 7,776 square-foot suite sold at 113th Avenue and Broadway; the other suite is 2,520 square feet and is located in a small medical complex in Michigan City. There were several sales of small office complexes with multiple buildings, such as Gordon Square in Highland, a Franciscan Health building in La Porte and a four building complex in Valparaiso. The Galleria in downtown Dyer also sold in Q2 and is primarily healthcare related offices but also has retail on the ground floor. Land O’ Frost moved their headquarters from Lansing Michigan in 2015 to Munster and built a new 24,965 square-foot building. That building also sold in Q2, though a sale price wasn’t disclosed.
Franciscan Health announced they were drastically reducing their presence in downtown Hammond. They will be downsizing the hospital from 226 beds to just 8. The hospital will become an acute care and emergency facility only, with an on-site primary care practice. Franciscan Health will also tear down a large portion of the 123 year old building. There are 80 employees who will be effected. They will be transferred to other facilities or laid off.¹ As a result of Franciscan Health’s decision, Kindred Healthcare had a location within the hospital but the space they occupy will be demolished, so they are laying off all 110 of their employees at that location.² The hospital was an anchor in downtown and was its largest employer. The loss will have a huge impact on the city, which has been working on redevelopment plans.
- Dermio Dermatology opened a new location in June in Valparaiso at 1351 Silhavy Road. The 3-story, multi-tenant building was built in 2006. They have other locations around the region including in DeMotte, Dyer, and Munster.³ Raymond James also leased a 5,425 square-foot space in the same building.
- Orthodontic Specialists, Dr. Koufos & Associates has opened at 1734 45th Street in Munster. They moved just a few properties down from their previous multi-tenant building to a freestanding property that was formerly a restaurant, Dante’s House of Pizza. Dante’s moved to The Pavilion on 45th shopping center, across the street from their former location.
Forecast
- Demand for smaller office spaces should continue. Larger vacancies will likely still take longer to lease.
- There is good velocity in the office market. Some higher priced locations such as Crown Point
are creating demand in neighboring communities such as Merrillville, which still offer a good location, but lower rents. - Vacancy isn’t expected to rise significantly as the office market in Northwest Indiana is fairly stable.
- Hospitals and medical facilities will drive growth in some corridors as new facilities are constructed.
- Older office properties that have been updated or renovated are also attracting tenants.
Sources
NORTHWEST INDIANA OFFICE SALES VOLUME
Source: Real Capital Analytics
NORTHWEST INDIANA OFFICE SALES BUYER COMPOSITION
Source: Real Capital Analytics
NORTHWEST INDIANA OFFICE SALES PSF ($)
Source: Real Capital Analytics
Retail Overview
NATIONAL AND LOCAL RETAILERS AND RESTAURANTS CONTINUE TO OPEN LOCATIONS IN THE NORTHWEST REGION
Retail and restaurants continue to recover in the region. It remains to be seen if the current COVID surge will have an effect on businesses in the coming months. So far not even the virus is keeping people away from shopping and dining as well as movie theaters and other venues, due to pent up demand from 2020.
Asking rents in the region are in the range of $11.30 for older properties to $25.28 for new Class A space. Vacancy is also higher in older properties. Some retailers and restaurants took advantage of the uptick in vacancies last year to upgrade within retail corridors due to more desirable spaces becoming available and landlords making deals to get them filled. The vacancy rate currently is approximately 14.5%.¹
Retail property sales have also been on the rise. There were twelve retail sales of note. Including a vacant big box; the former Big K at Griffith Plaza in Griffith sold for $4,773,800. There were seven sales of shopping centers, including Beacon Hill in Crown Point which sold for $6,375,000. The highest priced sale was for a newer strip center at 8100 Calumet in Munster. Tenants include Five Guys, Chipotle, Dunkin’, Jersey Mikes, and Midwest Express Clinic. The property sold for $14,250,000.²
Retailers opening or expanding in the Region:
- Terriyaki Madness a chain based in Seattle opened their first Indiana location in a 2,000 square-foot space in Valparaiso. The concept attracted so many customers they sold out in a few days. The owner is planning to open more locations in Northwest Indiana and also Mishawaka.³
- Midwest Express Clinic is expanding to Griffith in the Griff-Land Plaza at 1923 West Glen Park Avenue. They are taking a 4,000 square-foot space. An opening date hasn’t been announced.³
- Capriotti’s is opening at 1508 US-41, in Schererville in a former Which Wich. The retail center features several restaurants, local and national, as well as a Dialysis Center and a Midwest Express Clinic. It has a 57,000 square-foot big box vacancy. Both the big box and retail center sold in Q1.
- Sketchers has opened a Warehouse Outlet location the former Pier One space at the Shops on Main in Schererville. The center has several big box anchors including Nordstrom Rack and a Whole Foods.
- Portillo’s has announced plans to join a restaurant development in Schererville at 317 U.S. 41. Portillo’s will join Chick-fil-A, Olive Garden, and Longhorn Steakhouse on an outlet next to Lowe’s.⁴
- Chick-fil-A has opened two new locations in Valparaiso and Schereville. The Schereville location is adjacent to the Shops on Main in a new development called Oak Street. The Valparaiso location is in the Valparaiso Walk Shopping Center.
Trends
- More new housing developments have been announced which will likely spur more retail development.
- Pent up demand for shopping and dining
are helping businesses recover from the pandemic, however there could be a set back if the virus continues to surge. - Big box vacancies are still an issue, however with a few of them selling last quarter, there is hope they will be renovated for new tenants or converted to non-retail uses.
NORTHWEST INDIANA RETAIL SALES VOLUME ($)
Source: Real Capital Analytics
NORTHWEST INDIANA RETAIL SALES SELLER COMPOSITION
Source: Real Capital Analytics
NORTHWEST INDIANA RETAIL SALES PRICE PER SQUARE FOOT
Source: Real Capital Analytics
